Why Oil Prices Could Soon Skyrocket – UAE Energy Minister

 In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP
In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171st meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP

 

UAE Energy Minister Suheil al-Mazrouei said on Monday current low oil and gas prices are unsustainable and warned that if they last longer, it could lead to energy shocks.

Mazrouei said that “very good signs” of rising demand for oil have been seen in China and India, two of the world’s biggest crude consumers, and to some degree in Europe.

“This environment of low oil and gas prices, I don’t think it’s sustainable,” the minister said in a virtual interview hosted by the US-UAE Business Council.

Mazrouei said that if low oil prices persist for a long period, some of the current high-cost producers will drop out leaving a supply gap, pushing prices higher.

“We need someone to fill in that gap, otherwise we are going to have shocks in… prices and the last thing we want is to have shocks,” he said.

“We need to have stability and to have a reasonable and fair price.”

Brent crude crashed to multi-year lows under $20 a barrel and WTI (for May delivery) sank into negative territory in April for the first time in history  as demand slumped due to coronavirus lockdowns and a global supply glut.

The two benchmarks have recovered to around $40 a barrel after the OPEC+ producers alliance agreed to record production cuts of 9.7 million barrels per day in April, effective for two months starting May.

Earlier this month, the alliance extended the historic cuts through July as governments around the world ease unprecedented lockdowns in many countries.

Mazrouei said that although oil consumption has dropped to 2013 levels “we think things will go back to normal within one or two years.”

“Unless we have a second wave of Covid-19, I think we will see a demand recovery at a pace that is adequate to the cut we have done as… OPEC+, provided other producers do not rush and over-produce,” Mazrouei said.

Nigeria To Compensate For Overproduction As OPEC, OPEC+ Agree To Extend Oil Output Cuts

 

The Federal Government has agreed to make additional oil production cuts from July to September, after producing about 120,000 barrels per day more than its agreed quota for May and June.

The Organization of the Petroleum Exporting Countries (OPEC) members, led by Saudi Arabia and other key oil producers agreed on Saturday to extend historic output cuts through July, as oil prices tentatively recover and coronavirus lockdowns ease.

In a statement by OPEC, the 13-member cartel and its allies, notably Russia, decided to extend by a month further till July 31, it’s agreed 9.7 million barrels per day (bpd) cut in May and June.

“In light of these facts, and in view of current fundamentals, all member countries agreed to the five key elements in reaching their unanimous decision, which will be recommended to non-OPEC participating countries.

They 1.“reconfirmed the existing arrangements under the April agreement.

2. “Subscribed to the concept of compensation by those countries who were unable to reach full conformity (100 per cent) in May and June, with a willingness to accommodate it in July, August and September, in addition to their already agreed production adjustment for such months.

3. “Agreed to the option of extending the first phase of the production adjustments pertaining in May and June by one further month.

4. “Recognized that the continuity of the current agreement is contingent on them fulfilling elements 1 and 2 above.

5. “Agreed without dissent that the full and timely implementation of the agreement remains inviolable, based on the five key elements.

6. “The meeting, therefore, agreed unanimously to extend the first phase of the production adjustment agreed at the 10th (Extraordinary) OPEC and non-OPEC Ministerial Meeting for a further month, to now run from 1 May 2020 to 31 July 2020.

The Laggards

Countries like Nigeria and Iraq, who are regarded as the main culprits, did not comply with agreed output cuts, but the governments have agreed to deeper production cuts to meet up with the agreed quota.

Nigeria produced 120,000 barrels per day, beyond its quota, and Minister of State for Petroleum Resources, Timipre Sylva, said in a statement, Saturday that the federal government is ready to make additional oil output cuts from July to September.

Meanwhile, Iraq’s Ministry of Oil spokesperson, Assem Jihad, said in a statement, agreed to extra cuts but did not reveal how the government would reach agreement with oil majors on curbing output.

OPEC said all meeting participants agreed Saturday that countries that fell short of their production cut quotas so far were willing to make up for it in July, August and September.

Despite the difficulties, the output cuts have helped support oil prices, which rose to around $40 per barrel at the start of June for both the US benchmark, West Texas Intermediate (WTI), and Europe’s Brent North Sea contracts.

Around April 20, both had slumped to historic lows, with Brent falling as low as $15 and WTI briefly entering negative territory.

Saturday’s meeting had been originally scheduled for next week but was brought forward at the suggestion of Algeria’s Arkab.

OPEC, Allies Agree To Extend Output Cuts Through July

 

OPEC members led by Saudi Arabia and other key oil producers agreed Saturday to extend historic output cuts through July, as oil prices tentatively recover and coronavirus lockdowns ease.

The 13-member cartel and its allies, notably Russia, decided to extend by a month deep May and June cuts agreed in April to boost prices, the Organization of the Petroleum Exporting Countries said in a statement.

Prices had plummeted owing to falling demand as countries around the world imposed strict lockdowns to stop the spread of the new coronavirus.

“All participating countries… agreed on the option of extending the first phase of the production adjustments pertaining in May and June by one further month,” the OPEC statement said.

Under the terms of the April agreement, OPEC and the so-called OPEC+ pledged to cut output by 9.7 million barrels per day (bpd) from May 1 until the end of June.

The cuts were then to be gradually eased from July, to 7.7 million bpd until December.

Algerian Oil Minister Mohamed Arkab, who currently holds OPEC’s rotating presidency, told AFP that the agreed cut for July was 9.6 mbpd, just slightly below the 9.7 mbpd for May and June.

Oil ministers from key producers will meet monthly to assess the agreement, he added.

The April deal was signed after days of wrangling between major players, whose revenues have been ravaged by the collapsing oil market this year.

Analysts had expected the May-June cuts to be extended by at least another month, if not until the end of the summer or even until the end of the year.

Although more countries around the world are gradually moving out of lockdown, crude consumption has not returned to pre-confinement levels, which were already comparatively low.

– Respecting Quotas –

A bone of contention ahead of the meeting had been the willingness of each country to abide by the agreed production quotas.

According to data intelligence company Kpler, OPEC+ reduced output by around 8.6 million bpd in May, less than planned, with Iraq and Nigeria seen as the main culprits.

OPEC said all meeting participants agreed Saturday that countries that fell short of their production cut quotas so far were willing to make up for it in July, August and September.

Despite the difficulties, the output cuts have helped support oil prices, which rose to around $40 per barrel at the start of June for both the US benchmark, West Texas Intermediate (WTI), and Europe’s Brent North Sea contracts.

Around April 20, both had slumped to historic lows, with Brent falling as low as $15 and WTI briefly entering negative territory.

Saturday’s meeting had been originally scheduled for next week, but was brought forward at the suggestion of Algeria’s Arkab.

OPEC Sees Oil Market Already Rebalancing

 

The rebalancing of the oil market is underway and will accelerate, the OPEC cartel said Wednesday, days after some of its members voluntarily increased their production cuts.

The world oil market was thrown into disarray earlier this year as lockdown measures imposed by governments to slow the spread of the coronavirus led to plunge in demand just as crude producers had been stepping up output in a war for market share.

Prices tumbled, with the price of the benchmark US oil futures contract briefly plunging below zero.

But OPEC and its allies have agreed on major cuts in production, by 9.7 million barrels per day, and the cartel believes an improvement is on the horizon.

“The speedy supply adjustments in addressing the current acute imbalance in the global oil market has already started showing positive response, with rebalancing expected to pick up faster in the coming quarters,” OPEC said in its monthly report.

The collapse in oil prices — the main international benchmark has fallen by half since the start of the year — is leading some producers to shut down wells and the cartel now expects non-OPEC production to decline by 3.5 million barrels per day this year.

READ ALSO: New Resolution On Pandemic Truce Presented To UN Security Council

It believes the worst drop in demand will be recorded in the current April-June quarter.

The easing of restrictions and the massive stimulus programmes adopted by governments could now help the market bounce back.

OPEC said it now expects daily demand in 2020 to drop by some 8.5 million barrels per day from last year’s level, which is a roughly 8.5 percent drop.

AFP

OPEC Condoles With Buhari Over Abba Kyari’s Death

Mr Mohammad Barkindo                                                                    President Muhammadu Buhari

 

 

The Organisation of the Petroleum Exporting Countries (OPEC) has sympathised with President Muhammadu Buhari over the death of his Chief of Staff, Mr Abba Kyari.

In a letter addressed to the President on Saturday, OPEC Secretary-General, Mohammad Barkindo, said he received the news of Kyari’s death with shock and sadness.

He described the late Chief of Staff as an outstanding public servant par excellence, noting that his death would be felt by all Nigerians.

“May his gentle soul rest in eternal peace,” Barkindo said.

He added, “On behalf of the Organisation of the Petroleum Exporting Countries (OPEC), I would like to offer our sincere condolences to you, Mr. President, his family and the entire people of our great country, Nigeria.”

According to the OPEC Secretary-General, Kyari was a gallant public servant who was fiercely loyal to the common good.

He said it was obvious that the late Chief of Staff joined public service for all the right reasons, adding that he lived an exemplary life and loved his country.

Barkindo decried that Kyari’s death was another stark reminder of how the coronavirus (COVID-19) pandemic has cast a terrible shadow over all of humanity.

Read the OPEC Secretary General’s letter to the President below:

President Muhammadu Buhari, GCFR

Head of State and Commander in Chief

of the Armed Forces State House

ABUJA

Federal Republic of Nigeria

Mr. President,

It was with profound shock and sadness that I learnt of the tragic passing of Mallam Abba Kyari. May his gentle soul rest in eternal peace. We have lost an outstanding public servant par excellence and all Nigerians will feel his loss. On behalf of the Organisation of the Petroleum Exporting Countries (OPEC), I would like to offer our sincere condolences to you, Mr. President, his family and the entire people of our great country, Nigeria.

Mallam Abba was a gallant public servant, fiercely loyal to the common good.

When one was in his company, it was very clear that he was somebody who joined public service for all the right reasons. While this is, of course, a time of profound sorrow, we also take succor from his exemplary life, his courage, his dedication to duty and love of country.

Mallam Abba’s passing is another stark reminder of how COVID-19 has cast a terrible shadow over all of humanity. At this dreadful hour, we give thanks for your strong leadership and look to the timeless principles of cooperation and fraternity among all nations and peoples of the world to guide us through the darkest period in living memory.

May Almighty Allah give you, Mr. President, and the people of our great country, Nigeria, the fortitude to bear this rude shock. Please know that you are in our thoughts and prayers at this tragic time.

Please accept, Excellency, the assurances of my highest consideration and respect.

 

OPEC Members Except Mexico Agree To Output Cuts

 

OPEC meeting
A handout photo released by the Saudi Press Agency (SPA) on April 9, 2020 in Riyadh shows Saudi Energy Minister Prince Abdulaziz bin Salman al-Saud (R), chairing the virtual extraordinary meeting of the virtual extraordinary meeting of Organisation of the Petroleum Exporting Countries (OPEC) and non-OPEC countries, amid the novel coronavirus pandemic. SPA / AFP

 

Major oil producers except Mexico agreed to cut output in May and June by 10 million barrels per day, OPEC said Friday, after marathon talks to counter a collapse in prices.

The videoconference led by the Organization of the Petroleum Exporting Countries has been seen as the best chance of providing support to prices, which have been wallowing near two-decade lows due to the coronavirus pandemic and a price war between key players Saudi Arabia and Russia.

The agreement, which also reduces production by eight million bpd from July to December, depends on Mexico’s consent for it to take effect, the oil cartel said after the meeting.

The virtual meeting of OPEC countries, dominated by Riyadh, and their OPEC+ allies including Russia, as well as other key non-members, began just after 1440 GMT on Thursday.

Talks dragged on into the small hours of Friday. Bloomberg News reported that the main sticking point was the refusal of Mexico to sign up to its share of cuts under the deal, which would have been 400,000 barrels per day.

Mexican Energy Minister Rocio Nahle Garcia tweeted that her country had suggested a cut of 100,000 barrels.

Another virtual meeting is scheduled for June 10 “to determine further actions, as needed to balance the market”, OPEC said.

The current agreement also foresees a six mbpd cut from January 2021 through April 2022. An extension to the cooperation deal will be reviewed in  December next year, OPEC said.

Saudi Arabia will on Friday also host a separate virtual gathering of energy ministers from the G20 group of major economies in a similar bid to ensure “market stability”.

– ‘Less than hoped’ –

Stephen Innes, an analyst at AxiCorp, said the supply cuts were “less than the market hoped for” given the hit to demand from coronavirus lockdowns throughout the world.

“The deal currently tabled will only partially offset oil price distress, but that’s what it was supposed to do. Still, the storm clouds for oil prices will only completely dissipate when lockdowns are lifted,” he said.

Rystad Energy also said market equilibrium would not be re-established although the cuts for May and June would prevent prices from crashing.

Oil prices have slumped since the beginning of the year due to the COVID-19 pandemic.

At the beginning of the meeting, OPEC Secretary General Mohammad Barkindo warned that the rapid economic damage wrought by the virus meant the industry’s “supply and demand fundamentals are horrifying”.

“Our industry is hemorrhaging; no-one has been able to stem the bleeding,” Barkindo said, bemoaning companies already filing for bankruptcy and the tens of thousands of jobs that have been lost.

Compounding the problem, Riyadh and Moscow had both ramped up output in a bid to hold on to market share and undercut US shale producers.

While the US is not in the OPEC or OPEC+ groups, it is supportive of a reduction in supply in order to stabilise prices and breathe new life into its shale industry.

US President Donald Trump had expressed optimism about the prospects for an agreement — even as the talks appeared to be at an impasse.

Fresh from a conference call with Russian President Vladimir Putin and Saudi leader Crown Prince Mohammed bin Salman, Trump told a press briefing at the White House at around 2230 GMT on Thursday that a deal was “close”.

Shale has transformed the US into the world’s top producer, but the industry cannot sustain its high cost base as prices collapse.

Yet the US oil sector appears reluctant to trim production, having extracted a near-record 13 mbpd in the final week of March. This fell to 12.4 mbpd last week.

– Wide effort –

At the same time, the global supply glut — already weighing on oil markets before the coronavirus crisis — has stretched oil storage capacity to its limits, forcing many producers to scale back output.

In his opening statement to the meeting carried by the Rossiya 24 channel, Russian Energy Minister Alexander Novak welcomed the presence of several nations outside the OPEC+ alliance, namely Canada, Norway, Argentina, Colombia, Egypt, Indonesia, Chad, Ecuador and Trinidad and Tobago.

The International Energy Agency warned Monday that the world is set for its first annual decline in oil consumption in more than a decade because of the pandemic.

The outbreak has shut down large swathes of the global economy, including key sectors such as air travel, manufacturing and retail.

The global oil glut could reach 25 mbpd in April, according to Rystad Energy.

 

 

OPEC Puts Heads Together Over Oil Output Cuts

 

Top oil producers started a crucial meeting on Thursday to discuss a possible cut in output after a collapse in demand due to the coronavirus and a Saudi-Russian price war caused the market to crash.

The video conference meeting began shortly after 1440 GMT between OPEC, its OPEC+ allies including Russia and other key non-members.

Oil prices rose sharply as the meeting opened, extending earlier big gains, but then fell back again later to post more modest gains as nervous traders took profits in volatile business.

The meeting is seen as the best chance of providing support to prices which have been wallowing near two-decade lows.

Experts warn that without concerted action the commodity risks a steep sell-off.

Last week US President Donald Trump claimed Russia and Saudi Arabia would step back from their stand-off and agree to slash output.

Then OPEC kingpin Saudi Arabia called for an urgent meeting of producers “to try to reach a fair deal” to “stabilise the oil market” following a phone call between its Crown Prince Mohammed bin Salman and Trump.

Thursday’s meeting intends to conclude an agreement to cut production by between 10 and 15 million barrels per day, Kuwait’s Oil Minister Khaled al-Fadhel said in an interview with the Kuwaiti Al-Rai daily published Thursday.

Late Wednesday a spokesman for the Russian energy ministry told the TASS agency that Moscow was “prepared to cut 1.6 million barrels a day”, which would be the equivalent of 14 percent of Russia’s production in the first quarter of 2020.

Kremlin spokesman Dmitri Peskov in a press briefing on Thursday declined to give details, only saying Russia was in favour of “coordinated action to stabilise the global oil market”.

– Global standstill –

“The extraordinary producing-countries meeting is the only hope on the horizon for the market that could prevent a total price collapse,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.

Saudi Arabia will on Friday host a separate virtual gathering of energy ministers from the G20 group of major economies in a similar bid to ensure “market stability”.

Oil prices have slumped since the beginning of the year as the COVID-19 pandemic sends large parts of the planet into lockdown and brings the global economy to a virtual standstill.

Compounding the problem, Riyadh and Moscow have both ramped up output in a bid to hold on to market share and undercut US shale producers.

– Search for consensus –

“Saudi Arabia and Russia have been extremely clear that they will cut production if — and only if — other major oil producers join in as well,” said SEB oil analyst, Bjarne Schieldrop.

However, there are worries about the participation of US producers.

The US is battling to breathe new life into its shale industry, which has transformed the nation into the world’s top producer, but which cannot sustain its high cost base as prices collapse.

Yet its oil sector appears reluctant to trim production, having extracted a near-record 13 million barrels per day in the final week of March. This fell to 12.4 million bpd last week.

At the same time, the global supply glut — already weighing on oil markets before the new coronavirus crisis — has stretched oil storage capacity to its limits, forcing many producers to scale back output.

Trump on Wednesday told reporters that he wanted to save jobs.

“Obviously for many years I used to think OPEC was very unfair… I hated OPEC… But somewhere along the line that broke down and went the opposite way,” he said.

Ten oil-producing nations from outside the wider OPEC+ alliance, including the United States, have been asked to take part in Thursday’s meeting, Russian news agency TASS reported.

Canada, Britain, Norway, Brazil, Argentina, Colombia, Egypt, Indonesia, and Trinidad and Tobago have also been invited.

Norway’s oil ministry confirmed in a statement Thursday that it was taking part in the meeting as an “observer”.

The International Energy Agency warned Monday that the world is set for its first annual decline in oil consumption in more than a decade because of the coronavirus pandemic.

The outbreak has shut down large swathes of the global economy, including key sectors such as air travel, manufacturing and retail.

The global oil glut could reach 25 million bpd in April, according to Rystad Energy.

AFP

COVID-19: Oil Prices Fall As Doubts Grow Over Output Cut Deal

 

Oil prices fell sharply Monday after a meeting to discuss output cuts between OPEC and its allies was delayed, dimming hopes of swift action to support coronavirus-ravaged energy markets.

US benchmark West Texas Intermediate plunged eight percent at the open in Asia but clawed back some ground and was trading 5.7 percent lower, at $26.72 a barrel.

International benchmark Brent crude was down 4.3 percent to trade at $32.64 per barrel.

Oil prices have tumbled to levels not seen for years due to the coronavirus pandemic and a price war between Russia and Saudi Arabia, the kingpin of exporting group OPEC.

Business shutdowns, travel restrictions and other measures put in place to contain the virus outbreak have battered demand.

Prices had bounced back from 18-year lows last week after US President Donald Trump said that Riyadh and Moscow would draw a line under their dispute and agree to major output cuts.

READ ALSO: COVID-19: UK Warns Of Tougher Social Distancing Measures

But analysts had been sceptical about a quick resolution, and doubts only grew when the meeting between OPEC and its allies, including Russia, was delayed.

They had been expected to meet via video conference to discuss oil production cuts on Monday but the meeting has been postponed to Thursday, the government of energy-rich Azerbaijan said at the weekend.

Trump surprised investors last week by tweeting: “I expect & hope” Riyadh and Moscow will be cutting back “approximately 10 Million Barrels, and maybe substantially more”.

On Friday, Moscow said it was prepared to discuss a reduction in the volume of about 10 million barrels a day.

But Stephen Innes, chief global markets strategist at AxiCorp, said that “traders remain extremely sceptical a deal will be forthcoming, and if one does occur, it will be woefully insufficient to stem the oil supply gushers.”

AFP

OPEC Recommends 1.5-Mn-Barrel Output Cut To Allies

(FILES)The OPEC club of oil-producing countries meets on March 2, 2020 in Vienna as they weigh how to react to a sharp drop in global oil demand due to the outbreak of the new coronavirus.
JOE KLAMAR / AFP

 

Ministers from the OPEC cartel of oil-producing countries on Thursday recommended a drastic production cut of 1.5 million barrels per day to their allies to counter a slump in demand caused by the coronavirus outbreak.

However, it remains to be seen whether the OPEC+ states — Russia in particular — will be prepared to countenance such a large cut when they join the meeting of the Organization of Petroleum Exporting Countries on Friday.

OPEC nations — led by the world’s third-largest oil producer Saudi Arabia — agreed Thursday to recommend “a further adjustment of 1.5 million barrels per day until 30 June 2020,” a statement issued by the Vienna-based bloc said.

Countries in the OPEC+ grouping of the cartel’s allies would be asked to take on 500,000 barrels of the cuts, the statement added.

READ ALSO: Coronavirus: OPEC Divided On How To Combat Oil Prices Slump

Producers had already had to contend with abundant supplies weighing on prices — agreeing to 500,000-barrels-per-day production cuts at their last meeting in December — but the spread of COVID-19 across the world has sent prices plunging.

The European benchmark, Brent crude, sank to under $50 per barrel on Sunday, a level not breached since July 2017.

– ‘Might not be enough’ –
The success of the summit will above all hang on the alliance between Saudi Arabia and Russia, the most important players in the OPEC and OPEC+ groupings respectively.

Russian President Vladimir Putin was quoted on Sunday as saying the current market price was “acceptable” and above the level foreseen in Russian economic planning.

Russia’s RIA Novosti agency reported Wednesday that Moscow’s delegation was proposing an extension of the existing deal with no fresh cuts.

Ann-Louise Hittle, an analyst with Macro Oils, said she expected that Russia, world’s number two producer after the United States, to agree with the cut “given their history of co-operation with OPEC”.

Tamas Varga of PVM told AFP that even the recommended extra cuts “might not be enough”, saying OPEC’s new forecasts for a drop in global oil demand growth may turn out to be “overoptimistic”.

“I believe that oil prices will fail to recover significantly for the remainder of the year as the coronavirus crisis drags on,” he said.

Some economists believe it is not impossible that the world economy could contract in the first quarter of the year, which implies lower demand for oil than OPEC has been forecasting, although activity is expected to bounce back once the crisis fades.

Oil prices drifted lower after the announcement.

– ‘Footshake’ –
Aside from bridging their differences on the effect of the virus on the market, the assembled officials are also having to accommodate changes to their routines in Vienna.

All those entering the OPEC headquarters have to undergo temperature checks.

After the meeting’s opening speech, a medical advisor passed on hygiene guidelines, while assuring delegates that the risk of coronavirus infection in Vienna was “very, very low”.

Austria nationwide has recorded more than 40 cases so far.

On Wednesday, OPEC’s Secretary General Mohammed Barkindo and Russian Energy Minister Alexander Novak were seen in a video tweeted by the organisation attempting a “footshake”, gently bumping the sides of their feet together in a more hygienic alternative to a handshake.

The cartel has also barred access to its headquarters for the media due to the “risk that would come from convening such a vast number of people in one place”.

Livestreams of the beginning of meetings are instead being made available to journalists at a press centre in a nearby hotel.

In a statement on Tuesday, OPEC said it was following UN guidelines and planned to “shorten the format of such gatherings, limit the number of participants and cancel any related side-events”.

Coronavirus: OPEC Divided On How To Combat Oil Prices Slump

Nigeria's Minister of State for Petroleum Resources Timipre Sylva arrives for the 178th Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on March 5, 2020. ALEX HALADA / AFP
Nigeria’s Minister of State for Petroleum Resources Timipre Sylva arrives for the 178th Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on March 5, 2020. ALEX HALADA / AFP

 

Ministers from the OPEC group of oil-producing countries started meeting in Vienna Thursday to try to overcome their divisions on how to react to the fall in oil prices in the wake of the novel coronavirus epidemic.

The group already had to contend with abundant supplies weighing on prices but the spread of COVID-19 across the world has sent them plunging.

The European benchmark, Brent crude, sank to under $50 on Sunday, a level not breached since July 2017.

The effects of the virus on global demand — particularly in worst-hit China — has blown a hole through the group’s attempt to support prices at its last meeting in December by agreeing on production cuts of 500,000 barrels per day.

The only option for OPEC — and its allies in the OPEC+ grouping who will be joining meetings on Friday — would appear to be another round of production cuts, but not everybody agrees.

Cuts ‘imperative’

The success of the summit, which has been called three months ahead of the next scheduled meeting, will above all hang on the alliance between Saudi Arabia and Russia, the most important players in the OPEC and OPEC+ groupings respectively.

Saudi Arabia, the world’s third-biggest producer, is a supporter of further cuts, with Riyadh even thought to be amenable to a cut in the order of a million barrels per day.

“An agreement to reduce the OPEC+ group output level by at least one million barrels per day is imperative; otherwise oil prices will re-visit the recent lows and possibly break below them,” said analyst Tamas Varga of PVM Oil Associates.

But Russia, the world number two producer after the United States, may be harder to convince on this score, with Russian President Vladimir Putin being quoted on Sunday as saying the current market price was “acceptable” and above the level foreseen in Russian economic planning.

Russia’s RIA Novosti agency reported Wednesday that Moscow’s delegation was proposing an extension of the existing deal with no fresh cuts.

“Economic activity and oil demand is now collapsing around the world… If Russia does not step up now then what role does it really play in OPEC+?” said Bjarne Schieldrop, a commodities analyst at SEB bank said.

‘Footshake’

Aside from bridging their differences on the effect of the virus on the market, the assembled officials are also having to accommodate changes to their routines in Vienna.

All those entering the OPEC headquarters have to undergo temperature checks.

After the meeting’s opening speech, a medical advisor passed on hygiene guidelines, while assuring delegates that the risk of coronavirus infection in Vienna was “very, very low”.

Austria nationwide has recorded 39 cases so far.

On Wednesday, OPEC’s Secretary General Mohammed Barkindo and Russian Energy Minister Alexander Novak were seen in a video tweeted by the organisation attempting a “footshake”, gently bumping the sides of their feet together in a more hygienic alternative to a handshake.

The cartel has also barred access to its headquarters for the media due to the “risk that would come from convening such a vast number of people in one place”.

Livestreams of the beginning of meetings are instead being made available to journalists at a press centre in a nearby hotel.

In a statement on Tuesday OPEC said it was following UN guidelines and planned to “shorten the format of such gatherings, limit the number of participants and cancel any related side-events”.

 

AFP

Temperature Screenings, Footshakes As OPEC Meets Amid Coronavirus Concerns

(FILES) In this file photo taken on December 07, 2018 OPEC President UAE Energy Minister Suhail al-Mazrouei (C) speaks as he sits with Minister of Energy of Russia Alexander Novak (left) and OPEC Secretary-General Mohammed Sanusi Barkindo (r) of Nigeria during a meeting at the headquarters of the Organization of the Petroleum Exporting Countries (OPEC) with OPEC members and non-OPEC members in Vienna, Austria on December 7, 2018.
JOE KLAMAR / AFP

 

Delegates from oil-producing countries started arriving Wednesday in Vienna to discuss output cuts in a meeting overshadowed by worries over the new coronavirus — both its affect on oil prices as well as a big gathering like OPEC.

Two medical staff members, wearing Red Cross vests, were taking the temperature of ministers and other delegates entering the Vienna headquarters of the Organization of the Petroleum Exporting Countries (OPEC).

OPEC itself tweeted a video of Secretary-General Mohammad Barkindo greeting Russian Energy Minister Alexander Novak by trying to touch their feet together in a “footshake” — respecting coronavirus guidelines to avoid close body contact as much as possible.


Media have been barred from the building in an effort to keep participant numbers to a minimum.

READ ALSO: World Bank Unveils $12b Aid Package To Fight Coronavirus

Cookies and sandwiches were served on the sidewalk outside the building instead of next to the press conference room, usually thronged by journalists.

The OPEC extraordinary two-day meeting takes place Thursday and Friday in the capital of Austria, which itself has recorded almost 30 cases of the new coronavirus nationwide.

OPEC, led by Saudi Arabia, and its allies in the so-called OPEC+ group — foremost among them Russia — will discuss how to halt the sharp fall in oil prices in the past two months as the epidemic has spread and global oil demand has slumped.

At their last meeting in December, the producers agreed to cut production by 500,000 barrels per day, with Saudi Arabia offering a further 400,000 barrels of “voluntary” cuts.

The cuts announced in December initially had the desired effect of an uptick in prices — already under pressure at that point from abundant reserves and weak global growth — but the epidemic has since sent them plunging again.

Upon his arrival, Iranian Oil Minister Bijan Namdar Zanganeh — whose country has been strongly hit by the virus — urged OPEC and its allies to cut at least around half a million barrels.

“After the coronavirus situation we have an oversupply in the market, it’s necessary OPEC and non-OPEC do something for the balance in the market,” he told reporters.

OPEC’s joint technical committee (JCT) last month recommended a cut of 600,000 barrels to ward off the effects of the coronavirus slowdown.

While some analysts say this may not be enough, a cut of that magnitude could also meet resistance from Russia and other countries that say they are comfortable with current price levels.

AFP

OPEC To Review Oil Price Fall Following Coronavirus Epidemic

 

OPEC members and their ally Russia will convene a technical meeting this week to analyse oil price falls since the outbreak of a coronavirus epidemic, a source close to the cartel said on Sunday.

The Organization of the Petroleum Exporting Countries will assemble experts in a “joint technical committee’ in Vienna on Tuesday and Wednesday, the source told AFP.

Crude prices have suffered since the virus outbreak as worries about its impact on China’s economic growth have taken hold.

China is the world’s second-biggest economy and a huge consumer of crude.

US benchmark oil contract WTI has fallen by around 18 per cent over the past month.

Top oil exporter and OPEC kingpin Saudi Arabia said this week that the impact of the virus on oil demand was “extremely limited” but that the kingdom was closely following events.

A big part of the impact of global markets was “driven by psychological factors” and “pessimistic views”, Saudi said.

Russian energy minister Alexander Novak, seemed less sanguine, however, saying on Friday that the virus crisis could lead to lower demand for hydrocarbon fuels.

The 13-member OPEC cartel regularly sits down with 10 non-members led by Russia to decide on measures to influence the oil price.

OPEC and its allies in December extended an existing agreement to curb crude oil production to keep prices from plunging.